Full disclosure: I’ve purchased Groupons before, but that doesn’t mean I’m biased in favor of the company. Far from it, as most of the daily deals I’m pitched are for products and services I don’t want, for which already have a trusted provider, or are in places far enough way that I’m not going to want to try them out. I’m not sure that its the salesforce’s fault for my lack of a response as much as it is top management’s poor strategy and tactics. Nevertheless, Groupon’s top executives have decided to improve the quality of their offerings by laying off the “worst 10% of its sales staff.”
(Reuters) – Daily deals site Groupon is replacing the worst 10 percent of its sales staff as it pushes to win stronger deals from merchants and ensure it can keep growing, the company’s chief executive told potential IPO investors on Wednesday.
Andrew Mason told investors who had gathered in Boston that the action was designed to improve the quality of the deals being offered.
Groupon currently has a salesforce of over 4,800, according to its IPO prospectus.
As of September 30, Groupon had 143 million subscribers, but in the third quarter only 30 million of them bought Groupons.
Repeat customers increased from the second quarter but only numbered 16 million, according to a regulatory filing with the U.S. Securities and Exchange Commission.
Failing to win enough repeat customers may dampen the rapid growth that currently supports the company’s roughly $11 billion valuation.
Some merchants have complained that Groupon did not help them win permanent customers, and instead delivered bargain seekers taking advantage of price cuts. A portfolio manager at the roadshow said these complaints raised doubts about Groupon’s ability to keep growing.
People who’ve read our research on downsizing know that simply cutting people, especially when you haven’t determined properly which people need to go, is a poor downsizing strategy. I’m wondering if they properly identified who the 10% are, informed them in a fair and transparent way, and provided them with a compassionate severance package. Absent all of that, don’t expect the quality of Groupon deals pitched to you to get better, an in fact, expect it to deteriorate.